Lexington drew a line around itself in 1958. The Urban Service Boundary protects the horse farms that surround the city by limiting where urban development can go, and the result is a city where buildable land is scarce and infill is often the only way to add rental housing close in.
In short: LendingStreet finances ground-up construction of 1-8 unit investor properties in Lexington and central Kentucky, including spec homes, build-to-rent houses, infill duplexes and fourplexes, and small 5-8 unit buildings. Loans are sized on loan-to-cost with terms set per project, and funds are released through a draw schedule after inspections. Plans, permits, budget and builder experience drive approval.
Because development outside the boundary is tightly limited, new residential construction in Fayette County concentrates on remaining lots inside it, on expansion areas that have been planned for growth, and on infill parcels in older neighborhoods. The boundary has been reviewed and adjusted over the years, so check current maps for your parcel.
For investors, the boundary is a double-edged fact. Land costs more per lot than in many similar-sized cities, but new rental supply is also constrained, which supports rents for well-located new units. Nearby counties such as Scott and Jessamine have more open land and simpler sites, with lower rents to match.
Inside the boundary, infill sites also come with neighbors who care about scale and design. Plans that fit the street, with sensible parking and massing, tend to move through review with fewer objections, which protects your schedule and your carrying costs.
Common projects include side-by-side duplexes on infill lots in older neighborhoods, small townhome or fourplex buildings where zoning allows, build-to-rent single-family homes in newer subdivisions in Georgetown and Nicholasville, and spec homes in established areas where an older house has been removed. Near campus, small buildings designed for student or young professional tenants can work if the site and zoning cooperate.
Whatever you build, design for the tenant you expect. Lexington renters near campus value bedrooms with their own baths and in-unit laundry; families in Georgetown and Nicholasville want yards, garages and good school access. Matching the plan to the tenant base is what makes the eventual DSCR refinance work.
This example is illustrative and not a quote. A builder buys an infill lot for $90,000 and plans a duplex with $415,000 in hard costs and $45,000 in soft costs for design, engineering, permits, utility fees and builder's risk insurance. Total project cost is $550,000.
At 80% of cost the loan is $440,000 and the builder contributes $110,000, often with land equity counting toward that share. Terms are set per project; these figures only show how loan-to-cost sizing works.
Your soft cost line should cover more than design fees. Utility tap and connection fees, surveys, a geotechnical report, builder's risk insurance and interest reserve, if your program uses one, all belong in the budget so the loan-to-cost math reflects the real project.
| Draw | Share of hard costs | Amount |
|---|---|---|
| Site work and foundation | 15% | $62,250 |
| Framing, roof and windows | 25% | $103,750 |
| Rough mechanicals | 20% | $83,000 |
| Drywall, trim and finishes | 25% | $103,750 |
| Final and certificate of occupancy | 15% | $62,250 |
| Total hard costs | 100% | $415,000 |
Central Kentucky sits on limestone karst, where sinkholes and voids can sit below the surface. A geotechnical report is often worth its cost before you design foundations, and it can change your budget. Lots near known sinkholes may need special drainage or foundation work.
Sewer capacity is another early question. New projects in Lexington may need sewer capacity approval from LFUCG before permits are issued, and the answer can affect your timeline. Ask about capacity when you first talk with the planning office.
Stormwater management and tree protection rules can also shape a site plan in Lexington, especially on infill lots. A civil engineer familiar with LFUCG requirements can save weeks during plan review.
Construction funds are released as work is completed. You request a draw, an inspector confirms progress against your budget, and the approved amount is funded. Interest is charged only on what has been drawn. Organized invoices, lien waivers and photos speed up each inspection. Our draw schedule calculator helps you map stages to your timeline.
Plan for weather too. Central Kentucky winters are milder than in northern states, but wet springs can delay site work and foundation pours, so build some cushion into the early stages of the schedule.
Approval depends on readiness as much as numbers.
The more of this you have at the first conversation, the faster the review.
Raw land with no plans or permits, projects led by a borrower with no build history and no experienced general contractor, farm or agricultural land, and buildings of nine or more units fall outside these programs. For larger buildings, see our multifamily loans page.
Many Lexington builders keep new duplexes and homes as rentals. When the certificate of occupancy is issued, lease the units and refinance into a 30-year DSCR loan qualified on rent. New construction often has lower insurance and maintenance costs than older rentals, which helps the ratio. If you plan to sell instead, recent sales of new homes nearby set the target price.
If you plan to build several homes over time, completing the first project on budget and schedule builds the track record that supports better terms on the next one.
Our investor loans are business-purpose loans on non-owner-occupied property. Send your plans, budget, schedule and land details through the form below or call (877) 298-1001. For statewide information, see our Kentucky construction loan page.
Investor projects of 1-8 units, including spec homes, build-to-rent homes, infill duplexes and fourplexes and small 5-8 unit buildings.
On loan-to-cost: land plus hard and soft costs. Terms are set per project after review.
Development outside the boundary is very limited and is mostly rural or agricultural. Most investor projects are inside the boundary or in nearby counties.
It is not always required, but on karst soils it is often wise and may be requested for some sites.
Plans and permits, or a clear path to them, are expected. Projects without them usually do not qualify.
Usually only with an experienced general contractor and a realistic budget and schedule.
After inspections confirm each stage of work, through the draw schedule.
Yes. Lease them and refinance into a DSCR loan that qualifies on rent.
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